Amazon to purchase Whole Foods for US$13.7 billion

17 Juin 2017

Shortly after the announcement was made, Whole Foods stock (WFM) was trading at $32.77 per share in pre-market trading, down slightly from Thursday's closing price of $33.06. Amazon has also joined those companies in declaring they would adhere to the Paris Climate Accord despite the Trump administration's recent move to withdraw from the agreement. Amazon's rose 3 percent. The deal, after all, gives Amazon less than one-fiftieth of the grocery market. Kroger fell 13.4%. SuperValu was down 16%.

Not everybody was favorably impressed by the Whole Foods deal.

Online juggernaut Amazon said it pay $42 a share for Whole Foods.

Backed by its express delivery network, it has entered the USA grocery market with limited success through its online platform in recent years under a brand name known as AmazonFresh.

Amazon could cut costs if the technology gets good enough to deploy at Whole Foods locations. Buying Whole Foods is a venture into brick-and-mortar shops on a different scale.

The Canadian grocery sector has always been considered a bit of a laggard compared to the USA when it comes to e-commerce and delivery services.

It comes as the big three grocers have spent years fending off a steady market share incursion from Costco and Walmart, whose share of grocery sales rose to an estimated 10 per cent and 7 per cent of the market in 2016, respectively, according to CIBC, up from 7 per cent and 6 per cent in 2010.

Traditional food companies and grocers are already feeling the heat of the mega-merger as pre-market stocks took a dive.

The online retailer launched a grocery delivery and pickup service, AmazonFresh, in the US about a decade ago and started selling non-perishable food items to Canadians in 2013.

"People who used to say Amazon couldn't be profitable because they were just a bookstore might want to think before they suggest Amazon can't make money with Whole Foods because it's just a grocery store", Low said. "They're doing an wonderful job and we want that to continue". Amazon said it will continue to operate Whole Foods stores under that name as a separate unit of the company. Based on fiscal second-quarter results, the company's USA retail pharmacy segment was responsible for about 78% of total gross profit during the period.

Now, just as the Apple Store welcomes you with strangely motivated young people, Whole Foods' humans may begin to reflect positively on the whole Amazon experience.

Last year, Mackey grabbed firmer control after eliminating its dual-CEO structure.

Amazon is also likely to utilize its premium loyalty program, Prime, to draw in even more customers.

Jana Partners bought more shares in April, becoming Whole Foods' second largest shareholder, to agitate the company's executives for further changes. Jana had pushed to shake up Whole Foods' board of directors, among other changes. "U.S. private sector engagement can be a positive force for the kind of change we all wish to see in Cuba", said Myron Brilliant, the U.S. Chamber of Commerce executive vice president and head of worldwide affairs. Amazon is known for replacing stores with Web pages and workers with algorithms. "It's a quick opportunity to become a real player and start doing their favorite thing, which is clicking on Walmart's heels", Wank added. "Everybody's been kind of joking that it's going to be robots and drones", Clark said of potential changes fromAmazon, which uses robots in its warehouses and is testing drones for delivery. The U.S. grocery market is worth $750 billion annually and the average American family visits the grocery store twice a week.

"It gives them a first step in Canada", said Michael von Massow, an associate professor at the University of Guelph, adding Amazon has shown it's committed to entering the food business.

Reuters approached a dozen employees in California, New York, Illinois, South Carolina and Rhode Island.